The self-storage industry continues to outperform many commercial real estate sectors, thanks to rising consumer demand, predictable cash flow, and relatively low operational overhead. As more real estate investors seek to acquire or refinance self-storage facilities, Debt Service Coverage Ratio (DSCR) loans have emerged as a powerful financing option that simplifies the approval process by focusing on the income potential of the property itself.
In this guide, we’ll break down how DSCR loans work for self-storage facilities, their benefits over traditional lending options, eligibility requirements, and strategies for maximizing loan approval.
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A DSCR loan is a type of commercial mortgage that qualifies borrowers based on the property’s net operating income (NOI) compared to the proposed debt obligations—not the borrower’s personal income.
DSCR = Net Operating Income / Annual Debt Service
For example, if your self-storage facility generates $180,000 in annual NOI and the annual mortgage payment is $135,000:
DSCR = $180,000 ÷ $135,000 = 1.33
A DSCR above 1.20 is typically considered strong and signals to lenders that the property generates sufficient income to cover the debt service with a cushion.
Self-storage facilities are among the most consistent performers in commercial real estate. With low tenant turnover, limited maintenance, and stable demand, these assets are ideal candidates for cash-flow-focused lending like DSCR loans.
This makes DSCR loans especially appealing to self-employed investors, operators managing multiple facilities, or those who use aggressive tax strategies that reduce their reportable income.
Most DSCR lenders are open to financing a range of self-storage configurations, including:
Tip: Lenders typically prefer stabilized properties with 80%+ occupancy and consistent NOI for at least 12 months.
| Loan Feature | Typical Range |
|---|---|
| Minimum DSCR | 1.20 – 1.30 |
| Maximum Loan-to-Value (LTV) | Up to 75% (often 70% for cash-out refis) |
| Credit Score Requirement | 660 – 700+ |
| Loan Amount Range | $100,000 – $5,000,000+ |
| Ownership Type | Individual, LLC, Corporation, LP |
| Loan Terms Available | 30-year fixed, 5/6 ARM, interest-only options |
| Prepayment Penalty | 3–5 year step-down or flat penalty |
| Reserve Requirements | 6–12 months of PITIA reserves |
DSCR lenders will evaluate the income-generating potential and stability of the facility, not your personal income. Key factors they’ll consider:
Before applying, gather the following to streamline approval:
Optional but helpful:
| Issue | Solution |
|---|---|
| Low occupancy or inconsistent income | Delay loan application until stabilized or present a detailed turnaround plan |
| High loan amount relative to NOI | Increase down payment or reduce loan size to improve DSCR |
| First-time investor without experience | Partner with a seasoned operator or hire a professional management firm |
| Limited reserves or low credit score | Boost reserves or co-sign with a stronger borrower (if allowed) |
DSCR loans are a highly effective financing tool for self-storage investors. By focusing on property performance instead of personal income, they allow for faster approvals, greater scalability, and more flexible ownership structures—ideal for today’s entrepreneurial real estate investor.
Whether you’re refinancing a stabilized facility, acquiring your first storage property, or expanding a growing portfolio, DSCR loans offer a streamlined path to long-term, cash-flow-focused financing.
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